PHOENIX (Reuters) - Arizona Governor Jan
Brewer vetoed a bill on Wednesday derided by critics as a license to
discriminate against gays in the name of religion, citing opposition
from big business and warning that the measure could "create more
problems than it purports to solve."

The bill, passed by the Republican-controlled state legislature
last week, would have allowed business owners to claim their
religious beliefs as legal justification for refusing to serve
same-sex couples or any other prospective customer.

The measure was widely seen as a backlash against a recent string of
federal court decisions in several states, from Utah to Virginia,
recognizing marriage rights for same-sex couples.

But Brewer came under mounting pressure to veto the measure as a
number of major business organizations and some fellow Republicans,
including the state's two U.S. senators, John McCain and Jeff Flake,
came out against the legislation, dubbed Senate Bill 1062.

"Senate Bill 1062 does not address a specific or present concern
related to religious liberty in Arizona," Brewer said in a
statement. Gay-rights activists rallying outside the capitol erupted
in cheers at news of the veto.

"I have not heard one example in Arizona where a business owner's
religious liberty has been violated," she said, going on to critique
the bill as a broadly worded proposal that "could result in
unintended and negative consequences."

Brewer's veto coincided with another high-profile victory on
Wednesday for gay rights activists, who won a federal court decision
in Texas striking down that state's ban on same-sex marriage as
unconstitutional, although it was immediately stayed pending appeal.

In a nod to conservative supporters of the Arizona bill who have
expressed concerns over how such court rulings could encroach on the
religious convictions of those opposed to gay marriage, Brewer said,
"I understand that long-held norms about marriage and family are
being challenged as never before."

However, she added, "I sincerely believe that Senate Bill 1062 has
the potential to create more problems than it purports to solve. It
could divide Arizona in ways we cannot even imagine and no one would
ever want."

WIDELY OPPOSED BY BIG BUSINESS

Brewer also pointed to broad opposition the bill faced from the very
business community that supporters said the measure was designed to
protect.

And she noted that three state senators who voted for the bill,
which passed 17-14, had since reconsidered and were urging a veto.

Her veto announcement came hours after Major League Baseball and the
National Football League joined a growing chorus of business
organizations denouncing or expressing strong reservations about the
legislation.

Echoing calls for Arizona boycotts previously stirred by Brewer's
support for tough measures to clamp down on illegal immigration, the
Hispanic National Bar Association said on Wednesday its board had
voted unanimously to pull its annual convention from Phoenix in
light of last week's passage of 1062.

The measure gained final approval from the Republican-controlled
state legislature last Thursday, putting Brewer at the center of a
contentious political debate at a time when she has sought to ease
partisan discord while focusing on efforts to revive Arizona's
economy.

In her veto remarks, she chided lawmakers for failing so far to
address the top priority she set for the current legislative
session.

"Our immediate challenge is fixing a broken child protection
system," Brewer said. "Instead, this is the first policy bill to
cross my desk."

PROTECTING FAITH OR DISCRIMINATION?

Once a lightning rod for political rancor over her position on
immigration, Brewer struck a tone of conciliation in her rejection
of 1062 and suggested she was moved in part by concerns about the
appearance of bigotry.

"Religious liberty is a core American and Arizona value. So is
non-discrimination," she said, urging all sides "to turn the
ugliness of the debate over Senate bill 1062 into a renewed search
for great respect and understanding among all Arizonans and
Americans."

Cathi Herrod, president of the Center for Arizona Policy, which
helped draft the bill, insisted it was wrongly depicted by opponents
and "only sought to provide all individuals with the ability to act
according to their faith."

"The religious beliefs of all Arizonans must be respected, and this
bill did nothing more than affirm that," she said.

Critics of the measure argued that it amounted to state-sanctioned
discrimination and would tarnish Arizona's image.

Under the bill, a business would have been immune to a
discrimination lawsuit if a decision to deny service was motivated
by "sincerely held" religious beliefs and if providing service would
burden exercising of those beliefs.

Debate over the measure played out against a backdrop of growing
momentum for legalization of gay marriage across the country, with
federal judges striking down restrictions on same-sex matrimony in
several states, including New Mexico, Utah, Kentucky, Virginia and,
now, Texas.

Seventeen U.S. states and the District of Columbia recognize gay
marriage in a trend that has gained momentum since the U.S. Supreme
Court ruled in June that legally married same-sex couples nationwide
are eligible for federal benefits.

Arizona is among more than 30 states that still ban gay or lesbian
couples from marrying.